Critical Issue: Acquiring and Maintaining Adequate Equity Phil Kenkel Bill Fitzwater Cooperative Chair The major financial issue identified by the panel of cooperative experts was the need to acquire and maintain adequate equity capital. Cooperatives need additional equity to help finance growth and provide increased working capital. Production agriculture is experiencing a boom, especially in the crop production sector. This has resulted in a need for infrastructure updates and improvements. In addition, input and commodity markets have become more volatile, increasing the price risk to producers and agricultural cooperatives. Increases in crop yields coupled with the ability of seed genetics to grow crops in geographic regions where they had not been grown are creating the need for “speed and space”. Equity capital is also needed to improve liquidity and solvency so that the cooperative can offer risk management tools to producers, such as locking in a net margin per acre, by executing a grain selling decision in conjunction with agronomy and energy purchase decisions. Members want the co-op to invest in assets that increase profitability and reduce business risk. This requires more equity investment to finance the assets and strengthen the balance sheet. At the same time, members do not want the cooperative to slow down the rate at which equity is redeemed to the members. In other words, members want the benefits of the co-op but don’t want to accept the corresponding ownership responsibility. This puts even more pressure on boards of directors and managers to be profitable, to create more equity investment I will discuss the critical issues of profitability and efficiency in next week’s newsletter. 9-8-2011